Lenovo's Rocket Into the Sun Continues, Gaining 11.2%

Lenovos Rocket Into the Sun Continues, Gaining 11.2%

Lenovo (OTCMKTS:LNVGY) has always been kind of an also-ran when it comes to PC manufacture. It's never been quite as big a deal as, say, Dell (NYSE:DELL) or HP (NYSE:HP), but it's certainly been a part of the package. A look at the Amazon best sellers' list for PCs drives that point home; you have to go down 17 slots to find a Lenovo. However, the most recent round of trading saw Lenovo up 11.2%, backed by a series of developments that make the company a much more compelling package than its PC sales suggest.

An Increasing Short Interest in an Increasingly Valuable Stock

Recent reports noted that Lenovo is up around its 52-week high, having recently crossed that border with a share price of $28.80 that retracted to $28.66 as of this writing. That news comes on the heels of growing short interest in the company, which has been going on through much of March, at last report. March 15 saw Lenovo's short interest up at 17,100 shares, which is nearly double—78.1%—of the levels seen just two weeks prior at February 28.

What's prompting this short interest, in turn, isn't exactly clear; Lenovo Group's last earnings report came out back in early February, and featured a beat in both earnings per share and revenue totals. A look back at Lenovo share prices for the last year suggests a company that spent most of 2020 languishing in the $10-$15 range before taking a huge upward run starting about mid-December 2020 that is still being seen today. The company's share price has nearly tripled from this time last year; it was at $10.25 back on April 1, 2020.

Increasingly Bullish Sentiment from Analysts

Meanwhile, a look at the latest analyst perspective, as revealed by our latest research, underscores the growing interest in Lenovo in general. Bullishness for Lenovo started way back in July 2020, as the company stood at one “hold” and one “buy” rating.

That started improving back in December 2020—interestingly, about the same time as the company's upward run started—going to two “buy” and one “hold”. With February 2021's arrival, that improved still further, going to three “buy” and one “hold.” Now, one more improvement has kicked in as the “hold” rating has departed the field, leaving us with three “buy” ratings. Price targets, meanwhile, are oddly short on the ground.

A Line of New Developments Doesn't Hurt, Either

So we know now that there's increasing short interest in Lenovo, as well as a steadily-improving analyst sentiment that goes back about four months. These together could go some distance toward explaining why Lenovo's suddenly drawing so much interest, but there's another point that's likely contributing as well: new product developments.

Remember how we noted that Lenovo PCs aren't exactly brisk sellers, and that you need to depart the top 10 on Amazon before you find a Lenovo in the listings. Not exactly great news, and the fact that that particular Lenovo—the IdeaCentre 3—is a sub-$300 desktop doesn't help. However, the company has some new products coming up that may give it some new life.

First, Lenovo has gotten together with Barnes & Noble (NYSE:BKS) to produce the latest line of Nook tablets. This is good news on both sides, as Barnes & Noble has reportedly had a tough time keeping its Nook line stocked amid rapidly growing interest in reading. That's not particularly surprising; with a pandemic keeping people locked in for most of 2020, seeing reading make a comeback is right in line with the growth in streaming video and video gaming.

Better yet, Lenovo has also made moves toward the education side of pandemic living, featuring four new Chromebook laptops released just last week. All four are set to ship starting in May, and the most expensive one of the set runs $429. That worthy, the Lenovo 500e Gen 3, packs a surprising amount of durability for a Chromebook targeting the education sector, but the combination of Gorilla Glass display and MIL-SPEC-810H water resistance really does make it a good candidate for handing over to kids.

The whole concept together—new products in new markets that have demonstrated legs, increased analyst sentiment and increased short interest—adds up to a whole that's pretty positive for Lenovo going forward. It's still going to require a careful watch; if any part of this three-legged stool buckles the whole thing could go down with it. Still though, an investment in Lenovo is starting to look like a very attractive investment indeed, and worth buying in.

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Lenovo Group (LNVGY)$26.06+1.4%1.15%19.59BuyN/A
Helmerich & Payne (HP)$27.38+5.0%3.65%-5.97Hold$22.82
Dell Technologies (DELL)$93.26+0.8%N/A29.33Buy$78.67
Barnes & Noble (BKS)$6.49flat9.24%19.12N/AN/A